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CIR vs. Citytrust Investment Phils. Inc (G.R. No. 139786 September 27, 2006) - CD
CIR vs. Citytrust Investment Phils. Inc (G.R. No. 139786 September 27, 2006) - CD
CIR vs. Citytrust Investment Phils. Inc (G.R. No. 139786 September 27, 2006) - CD
139786
ASIANBANK CORPORATION v. CIR G.R. No. 140857
September 27, 2006 Sandoval-Gutierrez, J.
TOPIC IN SYLLABUS: Double Taxation- Instances of double taxation in its broad sense
SUMMARY: Citytrust reported its total gross receipts and paid the 5% GRT corresponding to it. Citytrust
claimed for tax refund, seeking to be reimbursed of the 5% GRT it paid on the portion of 20% FWT
contending that the 20% final tax on the passive income was already deducted and withheld by various
withholding agents. Hence, the actual or the exact amount received, as its passive income was less the
20% final tax and to include the same would constitute double taxation. SC held that the 20% FWT is
included in computing the 5% GRT and such does not amount to double taxation. The GRT is a
percentage tax, while the FWT is an income tax. The two concepts are different from each other.
DOCTRINE: Double taxation means taxing for the same tax period the same thing or activity twice, when
it should be taxed but once, for the same purpose and with the same kind of character of tax.
HOW THE CASE REACHED THE SC: PETITIONS for review on certiorari of the decisions of the CA
FACTS:
G.R. No. 139786
Citytrust is a domestic corporation engaged in quasi-banking activities.
In 1994, Citytrust reported the amount of P110,788,542.30 as its total gross receipts and paid the
amount of P5,539,427.11 corresponding to its 5% GRT.
On January 30, 1996, the CTA, in Asian Bank Corporation v. Commissioner of Internal Revenue
(ASIAN BANK case), ruled that the basis in computing the 5% GRT is the gross receipts minus the
20% FWT.
Based on this ruling, Citytrust claimed for tax, seeking to be reimbursed of the 5% GRT it paid on the
portion of 20% FWT or the amount of P326,007.01.
CTA:
monies or receipts that do not redound to the benefit of the taxpayer are not part of its gross
receipts for the purpose of computing its taxable gross receipts
the 20% final tax on the passive income was already deducted and withheld by various
withholding agents. Hence, the actual or the exact amount received, as its passive income in the
year 1994, was less the 20% final tax already withheld by various withholding agents.
to include it again would tantamount to double taxation
PETITIONER’S ARGUMENT:
Commissioner’s Arguments:
first, there is no law which excludes the 20% FWT from the taxable gross receipts for the
purpose of computing the 5% GRT;
second, the imposition of the 20% FWT on the bank's passive income and the 5% GRT on its
taxable gross receipts, which include the bank's passive income, does not constitute double
taxation;
third, the ruling by this Court in Manila Jockey Club, cited in the ASIAN BANK case, is not
applicable; and
fourth, in the computation of the 5% GRT, the passive income need not be actually received in
order to form part of the taxable gross receipts.
RESPONDENT’S ARGUMENT:
first, Section 4(e) of Revenue Regulations No. 12-80 dated November 7, 1980 provides that the
rates of taxes on the gross receipts of financial institutions shall be based only on all items of
income actually received;
second, Court's ruling in Manila Jockey Club is applicable
ISSUES+HELD:
1. WON the 20% FWT on a bank's interest income forms part of the taxable gross receipts for the
purpose of computing the 5% GRT? - NO
Numerous cases are unanimous in defining "gross receipts" as "the entire receipts without any
deduction.”
CIR v. Bank of Philippine Islands: The Tax Code does not provide a definition of the term
"gross receipts". Accordingly, the term is properly understood in its plain and ordinary meaning
and must be taken to comprise of the entire receipts without any deduction
CIR v. Bank of Commerce: The word "gross" must be used in its plain and ordinary meaning. It
is defined as "whole, entire, total, without deduction." Gross is the antithesis of net.
China Banking Corporation v. Court of Appeals: Under the ordinary basic methods of handling
accounts, the term gross receipts, in the absence of any statutory definition of the term, must be
taken to include the whole total gross receipts without any deductions
o the legislative intent to apply the term in its plain and ordinary meaning may be surmised
from a historical perspective of the levy on gross receipts. From the time the GRT on
banks was first imposed in 1946 under Republic Act No. 39 the legislature has not
established a definition of the term "gross receipts."
o Under Revenue Regulations No. 12-80 and No. 17-84, as well as several numbered
rulings, the BIR has consistently ruled that the term "gross receipts" does not admit of
any deduction. This interpretation has remained unchanged throughout the various re-
enactments of the present Section 121 of the Tax Code.
Commissioner of Internal Revenue v. Solidbank Corporation: When we speak of the "gross
earnings" of a person or corporation, we mean the entire earnings or receipts of such person or
corporation from the business or operation to which we refer. Webster's Dictionary gross
="whole or entire."